Paul Goble
Vienna, February 14 – While many analysts have speculated that demographic pressures will lead many Chinese to settle temporarily or permanently in Russia’s under-populated Far East, few have pointed to the reverse flow of Russian citizens from that area or further afield moving part-time or full-time to China.
In an article in “Svobodnaya pressa” yesterday, Galina Kosareva corrects that gap. She says that “from 30,000 to 40,000 Russians have already purchased apartments for themselves” in China, having concluded that they will be able to enjoy the kind of “peaceful and inexpensive life” they cannot get in their own country (www.svpressa.ru/economy/article/38866/).
On the one hand, her report undercuts suggestions by many Russian writers of a deep and unbridgeable ethnic divide between Russians and Chinese in the border regions. And on the other, it suggests that precisely because the two groups are less opposed to one another than many in Moscow think, there may be far more cross border moving in the future than in the past.
That in turn may work against Russia’s interests in yet another way, Kosareva says. While Russia is importing primarily unskilled construction workers, she points out, China has no need for such people and instead is attracting more highly skilled workers in the information technology sector who may not now be able to find jobs in Russia.
Despite the restrictions China continues to impose on foreigners seeking to buy property there – including evidence of the absence of other property in that country – Russians have been buying property in china since 2001 either as a place to live or as an investment, given rapid increases in the urban population of China and the expectation that prices will rise.
For the last decade, Kosareva notes, “the main wave of emigration into China has become from Russia, most of whom are businessmen and pensioners from the Far East” of the Russian Federation. Many of the former are seeking to take advantage of China’s booming economy, while many elderly Russians are interested in purchasing less expensive places to live.
In the Chinese cities near the border, the Moscow journalist says, one can “purchase a beautiful apartment of about 50 square meters for 20 to 30,000 dollars [whereas] in Vladivostok or Khabarovsk, one could not acquire even a room in a communal apartment for the same amount of money.”
According to Kosareva, “Russians are going to China not only for goods but also to work. Russian information technology specialists, engineers, scholars and instructors are much in demand in China” – or at least in vastly more demand than they are in many of the more depressed parts of the Russian Federation.
As a result, the journalist says, Russia’s top minds are leaving to work in China, while the Chinese moving to Russia are people “which their country doesn’t need because there is simply no unqualified work for them in their homeland. Or put more simply, Russia is sending China its best and brightest while China is sending Russia something less than that.
Monday, February 14, 2011
Window on Eurasia: Diamonds are Not the Russian North’s Best Friend, Ecologists Warn
Paul Goble
Vienna, February 14 – Lukoil’s plans to use an open pit to mine diamonds in Arkhangelsk has prompted residents and experts there to complain to Moscow and to national and international environmental groups that this will lead to “an ecological” disaster of enormous proportions, the latest chapter in a sad saga of post-Soviet industrial development.
At the end of last week, Barents Observer called attention to what it called “a looming diamond catastrophe” (www.barentsobserver.com/looming-diamond-catastrophe.4883579-116321.html), but many of the details of how the current crisis emerged are to be found only in a report on a regional news agency (http://www.arcticway.ru/index.php?id=130).
After Lukoil announced that it planned to extract diamonds from the Verkhotina field not from an underground mine but from an open pit, Barents Observer reports, local residents wrote a public appeal to Russian President Dmitry Medvedev warning that this shift “would completely destroy the local ecosystem and lead to an irreversible disaster.”
What has especially enraged local residents is that representatives of the Lukoil daughter company that is in charge of this operation solemnly promised during public hearings in 2005 that they would not use pit mines in this area. Now, without any additional hearings, the company has changed course, seeking profit at the expense of the environment.
Moreover, residents of the district say, this decision taken behind closed doors not only “violates their constitutional rights” to a clean environment, but it undermines the enormous efforts Lukoil and the Russian government have made to present themselves as environmentally friendly.
The resident’s complaints appear well-founded. The diamond field Lukoil wants to develop is within a protected wildlife reserve, and its development could lead to the destruction of several unique natural eco-systems. The residents say they will “fight to the end,” and they have been joined by Russian and international environmental protection groups.
This story begins in 1993 when Lukoil and its Arkhangelskgeoldobycha subsidiary set up a joint venture with the international diamond giant De Beers and its Canadian daughter company, the Archangel Diamond Corporation. Under the terms of that accord, the foreign firm was to finance prospecting and the Russian firm to give it a license if diamonds were found.
But after the Canadian firm determined that the field had some 67 million karets of diamonds worth five billion US dollars, Lukoil unilaterally refused to give it the promised license. ADA responded by bringing suit in various courts seeking five billion US dollars in compensation.
In April 2008, Russian Prime Minister Vladimir Putin hosted a meeting between the head of De Beers and Russian officials. As a result of his intervention, the former dropped it suits, and the latter according to a Putin promise was to obtain 49.9 percent of the field for an additional 225 million US dollars.
Then, in January 2009, ADC’s board in responses to worsening economic conditions and the company’s dire straits – it declared bankruptcy 11 months later -- backed out of that deal. That left Putin in an unfavorable position, ArcticWay reports, and because he “does not like to lose, especially to foreigners” led to Lukoil’s next move.
The Russian oil giant tried to make a deal with the Russian diamond major, Alrosa, but that too fell through, prompting Lukoil, which could no longer hope to find “’naïve Chukchi youths’ among foreign investors” to change its plans about mining in the ways that have sparked environmental concern and regional outrage.
“Perhaps,” ArcticWay’s Aleksey Petrov writes, “the oil company still had hopes of achieving something from its diamond dealings but more probably it simply is seeking to give the impression that everything is in order” and will shift its investments “into more real and profitable directions.”
The Arkhangelsk protests may push it in that direction, but however this case works out, one that highlights both the rush for profits at the expense of the environment and good business practices, this small story highlights the reality that in Russia today, diamonds are far from the North’s best friends.
Vienna, February 14 – Lukoil’s plans to use an open pit to mine diamonds in Arkhangelsk has prompted residents and experts there to complain to Moscow and to national and international environmental groups that this will lead to “an ecological” disaster of enormous proportions, the latest chapter in a sad saga of post-Soviet industrial development.
At the end of last week, Barents Observer called attention to what it called “a looming diamond catastrophe” (www.barentsobserver.com/looming-diamond-catastrophe.4883579-116321.html), but many of the details of how the current crisis emerged are to be found only in a report on a regional news agency (http://www.arcticway.ru/index.php?id=130).
After Lukoil announced that it planned to extract diamonds from the Verkhotina field not from an underground mine but from an open pit, Barents Observer reports, local residents wrote a public appeal to Russian President Dmitry Medvedev warning that this shift “would completely destroy the local ecosystem and lead to an irreversible disaster.”
What has especially enraged local residents is that representatives of the Lukoil daughter company that is in charge of this operation solemnly promised during public hearings in 2005 that they would not use pit mines in this area. Now, without any additional hearings, the company has changed course, seeking profit at the expense of the environment.
Moreover, residents of the district say, this decision taken behind closed doors not only “violates their constitutional rights” to a clean environment, but it undermines the enormous efforts Lukoil and the Russian government have made to present themselves as environmentally friendly.
The resident’s complaints appear well-founded. The diamond field Lukoil wants to develop is within a protected wildlife reserve, and its development could lead to the destruction of several unique natural eco-systems. The residents say they will “fight to the end,” and they have been joined by Russian and international environmental protection groups.
This story begins in 1993 when Lukoil and its Arkhangelskgeoldobycha subsidiary set up a joint venture with the international diamond giant De Beers and its Canadian daughter company, the Archangel Diamond Corporation. Under the terms of that accord, the foreign firm was to finance prospecting and the Russian firm to give it a license if diamonds were found.
But after the Canadian firm determined that the field had some 67 million karets of diamonds worth five billion US dollars, Lukoil unilaterally refused to give it the promised license. ADA responded by bringing suit in various courts seeking five billion US dollars in compensation.
In April 2008, Russian Prime Minister Vladimir Putin hosted a meeting between the head of De Beers and Russian officials. As a result of his intervention, the former dropped it suits, and the latter according to a Putin promise was to obtain 49.9 percent of the field for an additional 225 million US dollars.
Then, in January 2009, ADC’s board in responses to worsening economic conditions and the company’s dire straits – it declared bankruptcy 11 months later -- backed out of that deal. That left Putin in an unfavorable position, ArcticWay reports, and because he “does not like to lose, especially to foreigners” led to Lukoil’s next move.
The Russian oil giant tried to make a deal with the Russian diamond major, Alrosa, but that too fell through, prompting Lukoil, which could no longer hope to find “’naïve Chukchi youths’ among foreign investors” to change its plans about mining in the ways that have sparked environmental concern and regional outrage.
“Perhaps,” ArcticWay’s Aleksey Petrov writes, “the oil company still had hopes of achieving something from its diamond dealings but more probably it simply is seeking to give the impression that everything is in order” and will shift its investments “into more real and profitable directions.”
The Arkhangelsk protests may push it in that direction, but however this case works out, one that highlights both the rush for profits at the expense of the environment and good business practices, this small story highlights the reality that in Russia today, diamonds are far from the North’s best friends.
Window on Eurasia: Russia’s Structural, Fiscal and Demographic Trends Producing a Disaster, Standard & Poor’s Says
Paul Goble
Vienna, February 14 – Unless Russia carries out serious fiscal and political reforms, within 40 years, its state debt will rise to almost six times its GDP, a situation that will exacerbate and be exacerbated by its demographic decline, in which by mid-century, the “weight” of pensioners on working age Russians will be twice what it is today.
Those are the stark conclusions of a study conducted by the Western rating agency, Standard & Poor’s, and a disturbing reminder of the way in which the structural, fiscal and demographic trends of Russia, like those of many other countries, are interconnected and thus that much more difficult to solve (www.nr2.ru/rus/320244.html).
And while such interconnections are often the subject of discussion in Western countries, most research on Russia, including by Russian specialists, have typically focused on one or another of them, thus ignoring the ways in which they compound each other and the ways in which Russia too finds itself in a bind from which it is almost impossible to escape.
As reported on Saturday by the “Novy region” news agency’s Olga Radko, if current trends continue, Russia’s state debt will be 585 percent of GDP, its population will fall to 116 million, and 39 percent of its people will be over 65 compared to only 18 percent now, something that will place a far greater burden on the working age cohort.
Given the likelihood of the continuation of low and sub-replacement fertility rates and the relatively high mortality rates – Russia’s current mortality rate of 14.6 per 1000 is nearly twice that of the OECD countries where is it on average 8.1 – Russia’s population will continue to decline and to decline with specific consequences.
The share of the working population by 2050 will fall from the current 72 percent to 60 percent, an aging that the study suggests will have a negative impact on economic growth and public finance as well as increasing demands for spending on health and long-term care for the elderly.
“If the government does not conduct new reforms,” Standard & Poor’s concludes, “the general expenses of Russia connected with the demographic factor [alone] will increase from 13 percent of GDP in 2010 to 25.5 percent of GDP in 2050,” a rise similar to but in some ways even worse than that in other countries.
Moreover, the ratings agency says, while the increases in these burdens will be relatively moderate in the immediate future, they will then accelerate as those born earlier when birth rates were higher reach retirement age and push up pension payments from 9.4 percent of GDP now to 18.8 percent of that annual measure in 2050, despite the relatively low level of pensions there.
Under these conditions and unless Russia “carries out fiscal or structural political reforms,” its state debt could reach 585 percent of GDP by mid-century compared to the 11 percent of GDP that Finance Minister Aleksey Kudrin reported last year, something that would dramatically increase servicing costs.
But if Russia does conduct “radical structural reforms,” including the freezing of “all expenditures connected with the demographic factor at the current level,” then the rating agency which is concerned above all with fiscal order and the willingness of bond holders to purchase debt, Russia’s budget “will be balanced by 2016.”
Unfortunately, as the agency does not say, if Russia takes such steps, two things are likely at least in the short term. On the one hand, many of the poorest groups in Russian society, including pensioners, will suffer. And on the other, the country’s demographic situation will worsen, with the fertility rate falling still further and the mortality rate possibly going up.
In short, Russia, just like other countries but in a more intense form, faces few if any good choices. If it meets popular demands, it will face a mounting debt crisis to go along with its demographic ones. But if it doesn’t, it may avoid the former only to see the latter problems become even more serious than they already are.
Vienna, February 14 – Unless Russia carries out serious fiscal and political reforms, within 40 years, its state debt will rise to almost six times its GDP, a situation that will exacerbate and be exacerbated by its demographic decline, in which by mid-century, the “weight” of pensioners on working age Russians will be twice what it is today.
Those are the stark conclusions of a study conducted by the Western rating agency, Standard & Poor’s, and a disturbing reminder of the way in which the structural, fiscal and demographic trends of Russia, like those of many other countries, are interconnected and thus that much more difficult to solve (www.nr2.ru/rus/320244.html).
And while such interconnections are often the subject of discussion in Western countries, most research on Russia, including by Russian specialists, have typically focused on one or another of them, thus ignoring the ways in which they compound each other and the ways in which Russia too finds itself in a bind from which it is almost impossible to escape.
As reported on Saturday by the “Novy region” news agency’s Olga Radko, if current trends continue, Russia’s state debt will be 585 percent of GDP, its population will fall to 116 million, and 39 percent of its people will be over 65 compared to only 18 percent now, something that will place a far greater burden on the working age cohort.
Given the likelihood of the continuation of low and sub-replacement fertility rates and the relatively high mortality rates – Russia’s current mortality rate of 14.6 per 1000 is nearly twice that of the OECD countries where is it on average 8.1 – Russia’s population will continue to decline and to decline with specific consequences.
The share of the working population by 2050 will fall from the current 72 percent to 60 percent, an aging that the study suggests will have a negative impact on economic growth and public finance as well as increasing demands for spending on health and long-term care for the elderly.
“If the government does not conduct new reforms,” Standard & Poor’s concludes, “the general expenses of Russia connected with the demographic factor [alone] will increase from 13 percent of GDP in 2010 to 25.5 percent of GDP in 2050,” a rise similar to but in some ways even worse than that in other countries.
Moreover, the ratings agency says, while the increases in these burdens will be relatively moderate in the immediate future, they will then accelerate as those born earlier when birth rates were higher reach retirement age and push up pension payments from 9.4 percent of GDP now to 18.8 percent of that annual measure in 2050, despite the relatively low level of pensions there.
Under these conditions and unless Russia “carries out fiscal or structural political reforms,” its state debt could reach 585 percent of GDP by mid-century compared to the 11 percent of GDP that Finance Minister Aleksey Kudrin reported last year, something that would dramatically increase servicing costs.
But if Russia does conduct “radical structural reforms,” including the freezing of “all expenditures connected with the demographic factor at the current level,” then the rating agency which is concerned above all with fiscal order and the willingness of bond holders to purchase debt, Russia’s budget “will be balanced by 2016.”
Unfortunately, as the agency does not say, if Russia takes such steps, two things are likely at least in the short term. On the one hand, many of the poorest groups in Russian society, including pensioners, will suffer. And on the other, the country’s demographic situation will worsen, with the fertility rate falling still further and the mortality rate possibly going up.
In short, Russia, just like other countries but in a more intense form, faces few if any good choices. If it meets popular demands, it will face a mounting debt crisis to go along with its demographic ones. But if it doesn’t, it may avoid the former only to see the latter problems become even more serious than they already are.
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